Bank foreclosing on historic Old Stone Mill in Skaneateles

Dick Blume / The Post-Standard, 2007The Old Stone Mill, in Skaneateles, was undergoing renovation when this photo was taken on Oct. 2, 2007. The building is currently in foreclosure proceedings.
Skaneateles, NY -- The troubled historic Old Stone Mill property in the middle of Skaneateles has fallen on hard times yet again. The property, rescued from foreclosure in 2003 by a trio of local developers but mired in financial troubles for the next three years, is again on the auction block.

This time, Wilber National Bank is foreclosing on the property, saying the developers Eric Diamond and Frank Salvatore owe nearly $2.8 million in principal, interest and penalties on their mortgage.

Diamond’s OSM Development had renovated the old mill building, erected an addition and developed the property into retail and office space on the first floor with condominiums on the upper floors and underground parking in the basement.

The law offices of Nixon Peabody and financial advisers Morgan Stanley had moved to the building, although the financial office has since moved out.

F. Paul Vellano Jr., the lawyer representing the bank in the foreclosure, would not discuss details of the proceeding since the legal action is still pending. He said the actual foreclosure sale would not occur until June at the earliest.

According to papers filed in September at the Onondaga County Clerk’s Office, Diamond and Salvatore personally guaranteed a $3.05 million mortgage from Partner’s Trust Company, which later merged with M&T Bank. M&T sold the mortgage to Wilber National in June 2008. Wilber is based in Oneonta. The mortgage transaction was handled through the bank’s Cicero branch.

Salvatore, in papers included in the foreclosure filing, said he should not be liable for the mortgage. Salvatore declined to comment Friday. Diamond and his lawyer could not be reached for comment.

The property is assessed at $1.7 million, according to Onondaga County, and current taxes on the property total $50,462, which includes $24,441.38 in unpaid school taxes and $9,842.43 in unpaid village taxes.

Skaneateles town Supervisor Terri Roney and village Mayor Robert Green both said they hope the property is sold to someone who recognizes the historic significance of the building and can come up with a viable business plan for it.

Roney said the project came on the market just as the economy was faltering. "If he had finished two years earlier, you’d be talking about a whole different story," she said. "Unfortunately, he finished up at just the wrong time."

The Old Stone Mill — a stone building at 3 Fennell St. — was built in 1840 and was home to a flour and seed business until 1969. The building housed a succession of restaurants from 1981 until 1998.

Diamond’s OSM Properties LLC bought the property for $516,500 from William McDermott’s McDermott Associates Inc. At that time there was talk of the town and village offices buying the property, but the idea was scrapped. The municipalities were involved in plans to build a new fire station.

After the 2003 purchase, OSM had to contend with foreclosure actions filed by VIP Architects, which it had hired, and with McDermott, who agreed to hold a mortgage on the property.